Quarterly report pursuant to Section 13 or 15(d)

Going Concern

v3.8.0.1
Going Concern
6 Months Ended
Feb. 28, 2018
Notes to Financial Statements  
Note 3: Going Concern

As of February 28, 2018, the Company had cash and cash equivalents of $0.9 million and a working capital deficiency of $1.5 million. During the six months ended February 28, 2018, the Company used approximately $4.2 million of cash in its operations, of which $3.2 million was attributed to the mobile application development costs and $0.3 million was attributed to the workers’ compensation deposit. The Company has incurred recurring losses resulting in an accumulated deficit of $15.5 million as of February 28, 2018. These conditions indicate that there is substantial doubt about the Company’s ability to continue as a going concern within one year from the issuance date of the financial statements.

 

The ability of the Company to continue as a going concern is dependent upon generating profitable operations in the future and obtaining additional funds by way of public or private offering to meet the Company’s obligations and repay its liabilities when they become due.

 

Historically, the Company’s principal source of financing has come through the sale of its common stock. The Company successfully completed an Initial Public Offering (IPO) on June 29, 2017, raising a gross amount of $12 million ($10.9 million net of costs).

 

Exclusive of the development costs, the Company is currently using $0.3 million each quarter from its operations or less than $0.1 million per month. As a consequence of changing certain providers and achieving some economies of scale, the Company has already realized a significant reduction to its workers’ compensation expense, which has factored into its reduced cash burn. In addition, the Company continues to experience significant growth in the number of worksite employees. Subsequent to February 28, 2018, the Company has added through executed service agreements, approximately 6 clients, servicing 1,300 worksite employees with approximately $93 million in additional gross billings per year, representing an increase of approximately $1.7 million in gross profit. Our gross billings for the month of March grew 21% sequentially over the month of February.

 

The key features of the Company’s mobile application have been fully developed, one of the key feature has been released and two other key features are now ready to be released at no additional costs, except for the post implementation expenditures. The deployment of these features, expected in the second calendar quarter of 2018, would further accelerate growth as the Company’s clients would be able to remediate their turnover issues.

 

The Company’s plans and expectations for the next 12 months include raising capital to help fund expansion of its operations, including product development. The Company engaged an investment banking firm to assist the Company in (i) preparing information materials, (ii) advising the Company concerning the structure, price and conditions and (iii) organizing the marketing efforts with potential investors in connection with a financing transaction

 

We believe that our current cash position, along with our revenue growth and the financing from potential institutional investors will be sufficient to fund our operations for at least a year from the date these financials are available. If these sources do not provide the capital necessary to fund the Company’s operations during the next twelve months from the date of this report, the Company may need to curtail certain aspects of its operations or expansion activities, consider the sale of its assets, or consider other means of financing. The Company can give no assurance that it will be successful in implementing its business plan and obtaining financing on terms advantageous to the Company or that any such additional financing would be available to the Company. These consolidated condensed financial statements do not include any adjustments from this uncertainty.